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A GDF Suez SA-led group signed a concession agreement today with the Mongolian government to build a $1.2 billion power plant in Ulaanbaatar.

GDF, Sojitz Corp. (2768), Posco Energy Corp. and Mongolia’s Newcom Group, signed the 25-year concession agreement at Government House, according to Unenbat Baatar, the chief executive officer of Newcom. The 450-megawatt combined heat and power plant is scheduled for commissioning in 2017.

Half of Ulaanbaatar resides in unplanned districts where residents heat their homes with raw coal in winter. The resulting smoke has made Ulaanbaatar one of the world’s most polluted cities, according to the World Bank.